One disadvantage of commodity money is that
A) it cannot be readily converted to gold.
B) its quantity can fluctuate erratically.
C) its value does not change.
D) it has no value apart from its use as money.

Question

Quizplus · Accepted Answer

Commodity money is any form of currency that has some intrinsic value in addition to its value as money. A disadvantage of commodity money is that its quantity can fluctuate erratically, depending on the availability of the commodity that serves as money. For example, if a society uses gold as money and there is suddenly a large discovery of gold, the value of gold will decrease due to the increase in supply. Conversely, if a society experiences a shortage of gold, the value of gold will increase. This can lead to instability in the value of the currency, which can cause problems for the economy.

One Disadvantage of Commodity Money Is That